Mexico to hike minimal wage by 20% in 2023, elevating inflation worries By Reuters

MEXICO CITY (Reuters) – Mexico will elevate the minimal wage by 20% subsequent yr after employers, labor representatives and the federal government reached an settlement, officers mentioned on Thursday, though some critics warned the transfer may gas inflation.

The usual minimal wage will rise to round 207 pesos ($10.82) a day from 172.87 pesos ($9.03) a day, Labor Minister Luisa Maria Alcalde mentioned throughout a daily information convention alongside President Andres Manuel Lopez Obrador.

For employees alongside the U.S.-Mexico border, wages will rise to 312 pesos a day from 260 pesos a day.

The hike follows double digit-percent raises by Lopez Obrador’s administration yearly since he took workplace on the finish of 2018, searching for to curb Mexico’s huge earnings disparity.

The newest minimal wage improve was calculated taking inflation into consideration, notably worth will increase for primary items, Lopez Obrador instructed reporters, enjoying down inflation considerations.

“We do not see any danger of inflation taking pictures up,” he mentioned.

Mexico has been struggling to carry down stubbornly excessive inflation and the Financial institution of Mexico has elevated its key rate of interest by 600 foundation factors since mid-2021 to 10.0% in an effort to tame worth pressures.

Annual headline inflation in Latin America’s second-largest economic system hit 8.14% within the first half of November, down from 8.53% a month earlier. The intently watched core worth index, which central financial institution board member Jonathan Heath known as the financial institution’s greatest concern, continued to development as much as 8.66%.

Gabriela Siller, an economist at Banco BASE, pointed to 3 the explanation why she believes the deliberate wage improve will strain inflation additional, even when some wage hike was already baked into inflation forecasts.

“One, it is a very sharp improve; two, it isn’t accompanied by beneficial properties in productiveness; and three, we have had a number of years operating with robust minimal wage will increase,” Siller mentioned.

Luis Munguia, head of Mexico’s Nationwide Minimal Wage Fee (CONASAMI), mentioned costs are anticipated to remain nearly flat as a result of labor prices are already low in Mexico.

“Right here we nonetheless have some margin,” he mentioned.

Some 6.4 million employees will profit from the rise, or about one-third of Mexico’s formal workforce, greater than in previous years, he added. Munguia additionally mentioned he anticipated consumption to rise following the hike, because it has lately.

Salaries in Mexico stay far under U.S. ranges, the place the federal minimal wage stands at $7.25 an hour.

($1 = 19.1400 Mexican pesos)